Steven A. Russo
Title: President and CEO, Plimoth Investment Advisors
Age: 50
Experience: 20 years
After working for 14 years in large investment shops, Steve Russo went into community banking so he could spend more time with his family, and he hasn’t looked back since. After stints at Scudder Stevens & Clark and on the fixed-income desk at State Street Global Advisors, Russo went to work for Plymouth Savings Bank before moving over to what is now BayCoast Bank to help the bank launch Plimoth Investment Advisors, its investment management arm. Russo started with Plimoth in 2005 and became CEO of the firm in January of this year. Two months later, Plimoth Investment Advisors, which is jointly owned by BayCoast and Dedham Institution for Savings, acquired the trust and asset management divisions of Connecticut-based Savings Institute Bank & Trust. Not only does Russo greatly enjoy the community banking culture, but he thinks companies like Plimoth Investment Advisors helps keep community banks on an even keel with larger banks and is a good way for a bank to diversify its business.
Q: What do you like about being a community bank-owned organization?
A: The culture is different, going from a large investment firm to a community bank. I never really understood the term “community banking” until after working most of my career at large investment firms. After I began working at a community bank, I experienced how philanthropic the organization is and how much we are encouraged to give of ourselves in terms of money and time to support the greater community. Part of our everyday message of working at a community bank is we are encouraged to support community activities on a regular basis whether in our personal time or business hours. That’s just something you don’t get when you work for a larger firm.
The other thing I would add is that in terms of providing services and developing the business, we don’t sacrifice client service to enhance profits. We are not publicly traded and we don’t have analysts looking at quarterly earnings reports. This allows us to make decisions based on our long-term direction of where we want the company to go without sacrificing that level of customer service. Our banks are so philanthropic. Once, the president of BayCoast held a meeting entirely focused on the company’s vision in the community and giving back.
Q: Why is it important for banks to offer investment management services to its customers?
A: As larger banks expanded their product offerings beyond traditional banking services, smaller community banks had a tough time keeping pace. Many didn’t have the resources to build out different product lines including investments. That is a big component of why Plimoth Investment Advisors was created.
In 2005, BayCoast ran a trust services group, but recognized they needed to have an in-house investment discipline that could compete with larger competitors and offer sophisticated investment management solutions to individual and institutional clients. Plimoth Investment Advisors was established to really implement that strategy of developing necessary infrastructures allowing us to compete with larger regional and national financial institutions.
We also wanted to enable other community savings banks to offer these services. That led to strategic partnerships with other community savings banks and eventually Dedham Savings Bank becoming an owner of Plimoth Investment Advisors.
Q: How does offering an investment management arm help a bank diversify? What are the risks?
A: Traditional banking revenues flow from core lending activities and there are inherent risks associated with that type of business, whether it’s credit risk or interest rate risk. In any business institution, if you can diversify risks while enhancing revenue and profitability, that is a strategy you pursue.
In terms of BayCoast specifically, they are growing their fee-based business in two areas: insurance and asset management. Plimoth provides the investment management revenue income to its joint owners BayCoast and Dedham. This provides a revenue stream that complements the pure loan driven revenues and diversifies types of risk the financial institutions take. Developing these businesses are long term strategies by nature. As banks must invest capital to grow these fee-based businesses, it can take time to develop a revenue stream that will add to a bank’s bottom line.
The risks of each individual fee-based business segment vary. In terms of risk, community savings banks generally take very conservative approaches in terms of managing business growth and the risks that are inherent with any business line.
Russo’s Five Things To Keep In Mind About Market Performances:
- People generally overestimate their actual performance
- You usually hear about the good decisions, but rarely the bad
- Investments with high rates of return and “no risk” do not exist
- The word “guaranteed” is used far too liberally and often incorrectly
- What has done well in the past won’t necessarily do well in the future
